2014 MBCA 12, 2014 MBCA 12

Citation: Loewen v. Manitoba Teachers’ Society, Date: 20140124 2014 MBCA 12 Docket: AI 13-30-07940 IN THE COURT OF APPEAL OF MANITOBA BETWEEN : ) J. A. Kagan LAVERNA LOEWEN ) for the Applicant ) (Applicant) Respondent ) R. M. Beamish ) for the Respondent - and - ) ) ) Chambers motion heard: THE MANITOBA TEACHERS ’ SOCIETY ) October 17, 2013 ) (Respondent) Applicant ) Decision pronounced: ) January 24, 2014 MARC M. MONNIN J.A. [ 1 ] The applicant, The Manitoba Teachers’ Society (MTS), seeks leave to appeal pursuant to s. 48 of The Arbitration Act , C.C.S.M., c.

A120 (the Act ), from a decision of the Court of Queen’s Bench setting aside a decision of an arbitrator and reinstating the decision of a previous arbitrator. The effect of the Court of Queen’s Bench decision was to order that the respondent, Laverna Loewen, a former teacher and member of MTS, receive certain benefits under The Manitoba Teachers’ Society Disability Benefits Plan (the Plan), which the Plan’s administrator had withheld. Factual Background [ 2 ] The facts are not in dispute. In May 1992, Ms Loewen was injured in an automobile accident and rendered disabled.

At that time she was employed as a teacher and covered by the Plan. As a result, she submitted a claim and received monthly disability payments until February 2007. [ 3 ] At the time of her accident, which occurred in Manitoba, Ms Loewen was entitled to sue the third party involved in the accident. In August 1999, she settled her claim against the third party’s liability insurer, the Manitoba Public Insurance Corporation (MPIC), in the all inclusive amount of $425,000.

In 2007, MTS stopped making payments concluding that her global settlement with MPIC included a portion attributable to income loss which should be applied against the Plan’s liability for disability payments under the common-law doctrine of subrogation and to prevent double recovery. In addition, MTS relied upon certain provisions of the Plan, which provide as follows: Offset Provision Under this provision, the person’s disability income benefit is reduced by the following income: …. . . . . . 4. Where permitted by law, automobile insurance benefits paid or payable for loss of income.

Such benefits will include those

specifically mandated by the terms of coverage or legislation, as well as any other loss of income benefits included as part of a final settlement of claim. ... [ 4 ] In accordance with the provisions of the Plan, the matter was submitted to arbitration. The arbitrator chosen was Mr. C. Martin (now Martin J. of the Court of Queen’s Bench). The arbitrator was asked to decide three preliminary issues, which were as follows:

a) Did the Plan have a common-law right of subrogation which applied?

b) Did the provisions of the Plan allow it to offset amounts attributable to income loss in the (tort) settlement with/against disability benefits which were currently payable to Ms Loewen?

c) Did Ms Loewen bear the onus to demonstrate what part of the settlement was attributable to income loss? [ 5 ] In an award dated August 28, 2008, the arbitrator answered the questions as follows: 1. .... Answer: In general, the common law doctrine of subrogation applies to the Plan, but does not arise in this case because (

i) the Offset Provisions establish the scheme of reductions and recovery of benefits and (ii) my being unable to determine whether there has been full indemnification (although given my other findings herein this is academic). 2. .... Answer: No. 3. ....

Answer: Yes, as set out above. [ 6 ] After receiving the award, counsel for MTS wrote to the arbitrator seeking clarification, specifically as to whether there was still a live issue between the parties as to whether or not subrogation did exist pending disclosure by Ms Loewen, or alternatively, given the offset provisions under the Plan, did the doctrine of subrogation not arise at all. [ 7 ] The arbitrator replied on November 21, 2008, and part of his response was as follows (at para. 9): ….

In short, it is my view, as explained in the Award, that there is no live issue between the parties regarding subrogation.

It is my conclusion that, given the wording and scheme of this Plan, the doctrine of subrogation does not arise in this situation but rather the scheme for recovery of any potential overpayment is the Offset Provisions scheme and not through subrogation. [ 8 ] The effort of the award was, therefore, that MTS was not entitled to either claim recovery by way of subrogated claim, or use the offset provision in the Plan to deduct monies received by Ms Loewen in the global settlement from the disability payments required to be made under the Plan. [ 9 ] In January, the arbitrator was appointed a judge of the Court of Queen’s Bench of Manitoba. [ 10 ] As MTS delayed responding to the award, counsel for Ms Loewen applied to the Court of Queen’s Bench for an order to enforce it.

Shortly after, MTS sought leave pursuant to the provisions of the Act to appeal the award to the same court. [ 11 ] MTS abandoned its application for leave to appeal and Ms Loewen’s application for an order enforcing the award proceeded before Suche J. of the Court of Queen’s Bench, who dismissed it on the basis that the arbitration needed to be finalized before enforcement could be sought. The parties were directed to complete the arbitration.

[ 12 ] The parties chose a second arbitrator, but they were unable to agree upon the issues which were to be placed before him. Specifically, MTS took the position that the second arbitrator was entitled to revisit the decisions on the preliminary issues that had already been made by the first arbitrator. Ms Loewen did not agree. [ 13 ] After a rehearing, the second arbitrator issued a written award wherein he considered the doctrines of res judicata , issue estoppel, and abuse of process.

He concluded that these doctrines were not applicable as there was a lack of finality to the arbitration which had been conducted by the first arbitrator. He noted that Suche J. had refused to enforce the first decision which he took as evidence of the necessary lack of finality to engage those doctrines. The second arbitrator then proceeded to reconsider the decision on the preliminary issues, and held that the first arbitrator, in his view, was wrong.

He concluded that he should proceed to conduct the arbitration and deal with the issues on their merits. [ 14 ] Ms Loewen applied to the Court of Queen’s Bench to appeal the second arbitrator’s award on the preliminary issues. [ 15 ] The application came in before the application judge, Dewar J.

He concluded that leave to appeal should be granted as, in his view, there was a question of law; namely, whether the “principles of res judicata , including issue estoppel or abuse of process” (at para. 32) disentitled MTS from seeking a new hearing on the same issues that had been placed in front of the first arbitrator. He also concluded that the criteria established in the provisions of the Plan, dealing with appeals and s. 44(2) of the Act , were met. [ 16 ] The application judge then considered the appropriate standard of review on the issue of whether the doctrines, referred to above, applied.

He considered the Supreme Court of Canada’s decision in Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190. He concluded that a case involving an employee who makes a claim against a disability plan is different than one involving a grievance under a collective agreement. As well, he noted the provisions of The Labour Relations Act , C.C.S.M., c. L10 (the LRA ), under which a grievance arbitration is held. He was of the view that the Dunsmuir decision, which called for applying a standard of review of reasonableness, was not applicable.

Instead, the application judge considered that the second arbitrator’s decision dealt with a question of general law of central importance to the legal system and outside his specialized area of practice. Consequently, on the basis of the Supreme Court of Canada’s decision in Toronto (City) v. C.U.P.E., Local 79 , 2003 SCC 63 , [2003] 3 S.C.R. 77, referred to in Dunsmuir , that mandated a review on a standard of correctness. As well, since the Plan and the Act’s appeal provisions referred to a question of law, he was of the view that such language required a correctness standard.

In the alternative, if a standard of review analysis in accordance with Dunsmuir was required, he was of the view that three of the four factors mandated by Dunsmuir favoured a standard of review of correctness. [ 17 ] Approaching the issue on the basis of correctness, he concluded that on the first decision made by the second arbitrator; namely, that the doctrines of res judicata , issue estoppel, and abuse of process were not applicable, the second arbitrator was incorrect and erred in law when he ruled that they were inapplicable.

The decision of the first arbitrator was, in fact, final and as such, met the criteria set out in the jurisprudence relating to issue estoppel. As such, it could not be relitigated by the parties before the second arbitrator. He also concluded that, if he was wrong on that score, the doctrine of abuse of process applied as finality was not needed for it to apply. In his view, the parties had agreed to a process which had reached its expected conclusion and it was not open for one of the parties, namely MTS, to seek a second hearing on an issue which had already been determined.

All that was available to MTS was to appeal the award. [ 18 ] Having found that the second arbitrator was incorrect and that the first award still stood as it had not been appealed, he did not find it necessary to determine whether the second arbitrator’s decision, on the merits, was sustainable. [ 19 ] Given that the parties had agreed on the amount in dispute, he ordered that MTS pay that amount to the respondent, with costs to be spoken to.

Criteria on Application for Leave [ 20 ] The applicant seeks leave to appeal from the application judge’s decision pursuant to s. 48 of the Act which reads as follows: Further appeal to Court of Appeal 48 An appeal from the court ’ s decision in an appeal of an award, an application to set aside an award or an application for a declaration of invalidity may be made to The Court of Appeal, with leave of that court. [ 21 ] I was referred to the decision of my colleague, Chartier J.A. (as he then was), in Rolling River School Division v.

Rolling River Teachers’ Association of the Manitoba Teachers’ Society et al. , 2009 MBCA 38 , 236 Man.R. (2d) 249, as indicating how a chambers judge of this court should deal with leave applications under s. 48 of the Act , which involves an appeal from a judge of the Court of Queen’s Bench with leave.

In that decision, Chartier J.A. took the position that application under s. 48 of the Act , which unlike s. 44(2) , does not state the criteria to be met for leave to be granted, should follow the criteria normally applied in this court when dealing with decisions involving what could be called “a second appeal” (at para. 11). He concluded that it required a higher threshold and that the criteria to be applied is:

a) a “pure question of law or jurisdiction” (at para. 12);

b) a question of arguable merit with a reasonable prospect of success; c) “a matter of public interest that is of sufficient importance to warrant consideration by the province’s highest court” ( ibid. ); and

d) alternatively, in an exceptional set of circumstances, it would be judicious to grant leave even though one or more of the above three criteria are not met, but where a denial of leave may result in an injustice. [ 22 ] I will follow that criteria for the purposes of this application. [ 23 ] I must remind myself, however, that what is at issue at this stage is not the correctness or reasonableness of the second arbitrator’s decision, but whether this court should intervene with respect to the decision of the reviewing court.

The review of a panel of this court of a decision of a judge hearing an application for judicial review from an arbitrator involves determining whether the reviewing judge chose the correct standard of review and properly applied it. Those are two questions of law and are to be reviewed by the appeal court on the standard of correctness (see The Armstrong’s Point Association Inc. v. The City of Winnipeg et al. , 2013 MBCA 110 at para. 3 , citing Dr. Q v. College of Physicians and Surgeons of British Columbia , 2003 SCC 19 at paras. 43-44 , [2003] 1 S.C.R. 226).

Analysis [ 24 ] Applying that criteria to the matter at hand, I am satisfied that what the applicant seeks to bring before a panel of this court is an issue of law and not of fact. Factual issues are not the basis of this appeal. Therefore, the first criterion has been met. [ 25 ] As to the second issue of whether there is a question of arguable merit that has reasonable prospect of success, the gist of the appeal consists of the choice of standard of review by the trial judge and its application.

He concluded on the strength of his analysis of Dunsmuir that the standard of correctness was applicable based on his conclusion that what was before the second arbitrator was “a question of general law which [was] of central importance to the legal system and outside the arbitrator’s specialized area of practice” (at para. 58). In the alternative, he performed a standard of review analysis, reaching the conclusion that it also led to a finding of correctness. [ 26 ] In my view, that issue raises one of substance.

It appears, at first blush, to be inconsistent with the Supreme Court of Canada’s decision in Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals , 2011 SCC 59 , [2011] 3 S.C.R. 616, on appeal from this court, and merits consideration by a panel of this court.

Therefore, the second criterion has been met. [ 27 ] As to the third criterion, namely, an issue of importance, I agree with counsel for the respondent that, contrary to the criteria set out in s. 42 of the Act and in the Plan, the question is not the importance of the issue to the parties but rather to the public at large and to the development of the law in Manitoba.

I am satisfied that, given the extensive and growing use of arbitration clauses in various contracts, especially insurance contracts, the question of whether an appeal should be on the basis of a correctness or reasonableness standard is a matter of significance.

So, while the outcome of this particular case may not in itself be of substantial import to other than the parties, the legal consequences that flow from the determination of the appropriate standard of review is a matter which may have broader application and, in my view, warrants consideration by this court. [ 28 ] For these reasons I would grant leave to appeal. I would frame the questions to be placed before the court as follows:

a) Did the application judge err in reviewing the second arbitrator’s decision on a standard of correctness?

b) Did the application judge err in concluding that the second arbitrator’s decision, on the question of whether the doctrines of res judicata , issue estoppel, and abuse of process were inapplicable, was incorrect?

c) If the appropriate standard of review to be applied to the second arbitrator’s decision is reasonableness, did the second arbitrator’s decision meet that standard? [ 29 ] I have added the third ground of appeal given that if the applicant is successful in his argument that a reasonableness standard should have been applied, the panel of this court may wish to deal with the matter rather than sending it back to another judge of the Court of Queen’s Bench to review it on that standard. That would be the panel’s prerogative, but, in an effort to assist in the process, the parties should be prepared to address the issue. J.A.